Are Teenagers Helped or Hurt by Minimum Wage Laws?

A recent Wall Street Journal article cites a new study that deals with teenage unemployment and the minimum wage.  About a year ago, the Federal minimum wage was raised over 40% to $7.25 per hour.  One year later, what’s the impact of that minimum wage rate increase?  Did it help or hurt teenagers seeking work?  Let’s talk about it now.

Two labor economists whose work was published by the  Employment Policies Institute have found a “significant drop in teen employment as a direct result of the minimum wage hikes.”  In fact, over 100,000 less teens are employed than last year!  That means the hike in minimum wage rates resulted in about a 2.5% decrease in teen employment.

From economics, we know that raising the price of a product or service tends to reduce demand for that product or service.  In this case, there is less teen employment (fewer teens are getting jobs) because the price of teen labor services is increased by the government.

Minimum wage laws and maximum pay laws both cause adverse disruptions in the free market.  Let’s eliminate these types of laws and let the free market set the prices for labor services that maximizes employment, especially during a period of high unemployment.  After all, which situtation is better for a teenager or any worker – no job or a job at a lower pay rate?

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.